Microinsurance serves as a financial tool to assist low-income entrepreneurs mitigate risks while protecting them from financial emergencies that threaten their incomes.
Currently, each country has its unique definition for what constitutes a low-income entrepreneur and a low-premium insurance product. It's recommended that definitions for what constitute microinsurance services be defined at the regional, not country level.This will allow for greater collaboration in how this financial service is designed and delivered to markets ensuring better regulation and a reduction in administrative fees. With effective use, microinsurance can help Micro-Small and Medium Enterprises (MSMEs) to become more resilient against economic shocks and generate increased investments in these vulnerable businesses.
Image sources: Multilateral Investment Fund Member of the IDB Group, GIZ - Deutsche Gesellschaft für Internationale Zusammenarbeit
A 2007 study conducted by the MicroInsurance Centre estimated that the total number of lives covered by microinsurance services in the Americas, Africa and Asia exceeded 78.5 million. The products were classified as the following: Life, Health, Accident & Disability, Property & Index.
The total number of individuals insured in the region is more than 50 million with life insurance being the most popular product. A 2013 study found that there were 94 providers from 21 of the 32 countries assessed that reported microinsurance activity. The volume of coverage by product type is more than the total covered lives meaning that many people are protected against more than one type of risk.
Source: The Landscape of Microinsurance in Latin America & the Caribbean by Micrinsurance Network, MunichRe Foundation, Microinsurance Centre (2015 - ISBN 978-99959-936-1-0)This region has an estimated microinsurance market of more than 700 million people. According to the World Bank, the annual income for this group exceeded 500 billion USD in 2007. The landscape survey concluded that 14.7 million African lives were covered by microinsurance, resulting in 257 USD in received premiums. A majority of providers surveyed in the region expected their national market to grow by over 10% in the coming years with 40% of participants expecting market penetration to double in the next five years.
Source: The Landscape of Microinsurance in Africa by International Labour Organization (2010 - ISBN 9789221233497)Microinsurance coverage and premiums generated a compounded annual growth rates of 31% and 47% from 2010 to 2012. India is the main growth driver.
Although microinsurance is popular in Asia with about 1.66 billion individauls and properties covered by social microinsurance in 12 Asian countries, this financial service is in it's infancy in countries in Oceania like Fiji and Papua New Guinea. In Asia, coverage growth continues but as of 2013, only about 4.4% of entrepreneurs living in region were covered under the microinsurance sector.